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If you want your rental property to succeed, you’ve got to give people a reason to keep coming back. That’s exactly what today’s guest is doing—creating a one-of-one experience that people can’t get anywhere else. It’s what keeps his property booked year-round!
Welcome back to the Real Estate Rookie podcast! Just three years ago, Chase Charifa bought his first rental property—a black, mid-century cabin tucked away in Big Bear, California. By engaging each of the guest’s five senses and adding intrigue with a “secret” amenity, Chase and his wife, April, have created an unforgettable guest experience that allows them to stand out in their market. As a result, this short-term rental brings in about $120,000 per year!
But that’s not all. Since launching his Airbnb, Chase has taken on another four rentals, three new construction projects, and a parcel of land. How has Chase been able to scale his portfolio in only a few years? In this episode, he shares how he was able to fund several deals using creative financing and smart tax strategies. He also talks about the huge opportunity that exists with real estate development. You’ll learn how to find land, get approved for a construction loan, and build your own development team!
Ashley:
This is Real estate Rookie episode 393 Financing can be a big obstacle for getting deals done, but today we will explore how a creative eye and an handle on funding we’ll get you a deal. My name is Ashley Care and I am here with Tony j Robinson.
Tony:
And welcome to the Real Estate Rookie Podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today we are getting into unlocking a property’s potential with Chase Sharifa. Now, how to target and how Chase and his wife targeted the five senses when they incorporate a secret amenity into their properties, why ground up construction is something rookies may be missing out on and so much more. So Chase, welcome to the podcast brother. Super excited to have you here.
Chase:
Thank you, Ashley. Thank you Tony. I’m so excited to be here. Yeah, I’m excited to share what we’ve learned and what we’re all
Tony:
About. Funny side story, chase and I are actually neighbors. We literally live in the same subdivision and he and my wife Sarah have bumped into each other out walking the babies and stuff. So excited to have someone from So Couch you is kind of representing brother. So Chase,
Ashley:
Can we start off with you telling us about how creative you got in your real estate journey?
Chase:
Sure. Yeah. So I guess the creativity portion came from our first property. So we call it the Lightfoot Cabin. Funny enough, the name is not so creative, it’s just a street that it’s on, but it essentially created our brand. Lightfoot is kind of synonymous with all the things that we now do. So it was back in the pandemic and everyone was kind of into, I guess, unquote Van Life and my wife and I wanted to get into that, but I guess one car dealership dealer said, yeah, you could use a second home loan on this. And I’m like, well Chase, you’re a lender second home. Why am I using it on a depreciating asset? No hate on the van Life people. But I was like, well, why don’t we buy a actual vacation home instead? And naturally in SoCal we think of Big Bear. So we started going up there and one day we went up while it was snowing and we found this property actually outside of Big Bear, and it was just so magical that the snow was falling and it still needed work, but it really drew us in and that was at that point where we made an offer and then we put in all our creative work.
This property was built around 1960s, I believe, 1965. So we really wanted to go with a mid-century vibe, which at the time, 2021, that’s what we were really excited about. I knew I needed one thing where this has to be a black cabin. I mean, I think my favorite color is black. My truck is black, most of my shirts are black. Anyway, I was like, it has to be a black cabin with a cedar outside. So that’s kind of what we went with. And we had just a feeling at the time because we were traveling that this needed to be a couple’s getaway, even though a lot of other people were telling us, don’t paint it black, don’t make it a couple’s getaway. Airbnb is all about beds with heads, but we really wanted to focus in on the couple’s getaway and also making the experience more than just arriving there and sleeping.
So we came up with this five senses type of thing where visually it’ll be there. But also our thought process was as you walk in, we wanted music to be playing, so then it would kind of fill the space a little bit more. We also put a scent near the front door that we now curate for it adding to the five s senses now that you have smell and you have sight, you have hearing, and then as you walk down to the main level, there are fresh cookies or some sort of pastry there to incorporate that sense of taste. And then we have, one of my friends found a way to wifi connect our gas fireplace so that we could turn it on as soon as they unlock the SLE Glock. So then now you have everything kind of into a well-rounded full experience as you enter. So that’s kind of what we did for that space.
Ashley:
That’s awesome. So let me just ask about that fireplace real quick. The first thing I thought of when you said that, so are you manually having to turn the fireplace on so you’re having to watch when somebody actually checks in, or did you find a way to automate that process too?
Chase:
We haven’t found a way to automate that process. Right now, this is the only property that we do that on. It’s the one that’s closest to us and it’s like our flagship property. So it’s kind of the one that we try to go all out on to make our portfolio look good. And I guess it’s the one that we’re, we test out the most. We try to do the most creative things on this one and see if it sticks or if it doesn’t stick well,
Ashley:
I think that’s where the story may be going with you as to how these personal touches and actually having a hands-on Airbnb can be more profitable than something that’s more passive. Because you listen to a lot of investors say, put your systems and processes in order, automate, automate, automate, be hands off. You don’t want to have to know anything that’s going on. You don’t want to have to do everything, have a process or have a VA or have some kind of AI technology take care of that for you. So tell us a little bit more about what are some unique hands-on things that you are doing for this property that does take some time commitment for you, but as I hoped and we haven’t touched on, this had turned you a profit.
Chase:
It has, yeah. So something that unique that we do for our property is we have a secret amenity. So a lot of people claim they have something hidden, but they still promote it on social media. We don’t at all. My idea was kind of like a fight club John Wick type of thing. So it’s like a secret through and through. So the day that you’re going to check in, the guests get a text three hours before saying, Hey, we’re excited for you to come in by the way your adventure starts now you’re going to be going through a treasure hunt and your first clue is on the island, just get started. And so it already hypes up everyone and they’re like, what is happening? My son loves amazing race. He goes, daddy clue. So I was like, oh, we got to leave a clue. So we created all these little letters on each one because when my wife and I were dating, we used to give each other treasure hunts or scavenger hunts for dates.
So I was like, well, why can’t we do that to guests? So make it special already. So when they arrive, they open the door, they have the five senses, and they’re already so excited and so hyped. And then now there’s this treasure hunt that they got texted. They go to the island and they look at the first clue. And essentially it’s not a very difficult treasure hunt. What it is, it’s a way for them to tour the property to see all the highlights of the property, but through this treasure hunt. So they get to see the bathroom and they get to see this mirror that we liked or we really love our slatted wall and we want to take ’em to the typewriter that we curated from Facebook. And then they go to the record player so they know there’s a record player. And then the very end is that there is a last clue where I’m a big fan of Batman. And so I love the whole hidden door thing. So we installed a hidden bookcase door that leads to the base of it and the last clue says to open that up. And then it leads you to the clue, and then the clue leads you to a secret hidden cinema room.
And it has a sign that says silence is golden. So keep it hush hush. There’s a candy wall where you have all sorts of candies, there’s popcorn. We went all out, we did a laser projector thing. I forgot what it was called, but it’s a hundred inch projection screen. You just have to imagine it. I’ll never show you unless you stay there. I’m just kidding.
Ashley:
I’m just thinking you said this is romantic getaway for couples. My kids would go crazy over this scavenger and going in and finding that movie room.
Chase:
No, the last thing that I was just going to say was that we don’t advertise it at all on our Airbnb listing. So there’s no mention of movie room and then we tell all our guests to just, this is for you. So even when they book us, we tell them that, Hey, there’s so much more. And this secret amenity is for you, for trusting us, for picking our cabin. So
Tony:
Chase, I just looked up your listing on Airbnb and you guys did a phenomenal job, 4.99 rating across almost 200 reviews just on Airbnb alone. That’s hard to achieve, right? To hold them as a perfect five star rating with 200 different reviews. And I’ll also say, I think you’re incredibly brave for having such a cool amenity and not talking about it because as soon as we put anything in our property, the first thing we do is take pictures and put it up on the listing because we want people to know about it. But the fact you’ve curated this experience, I think just goes to show what it is you’re hoping to give your guests. And obviously it seems like it is working out well for you. Brother, if we can, I just want to lay the table here just a bit, but what’s your total portfolio look like today, chase?
Chase:
Outside of the primary, we have five current short-term rentals spread out through multiple states. Funny enough, when you were talking about the Smoky Mountains, my wife caught it back then and that was one of the reasons why we went. So just really cool thing when we were looking at BiggerPockets initially. So when we do have one in the Smoky Mountains in Gatlinburg and one in Sevierville Weirs Valley, we have one in Kentucky and also in Branson, Missouri. So we have five total. But the reason why I was breathing a little bit is because we have three new construction projects happening at the same time, kind of staggered throughout out, and we just closed on a land, a piece of land that we just acquired last week. So hopefully by the end of year we’ll hit nine or 10. Well
Ashley:
Chase, I do want to find out the outcome of this property and what the numbers are on this big bear deal. So we’re going to take a short break and when we get back we want to touch on that. Welcome back from our short break everyone. We are here with Chase who is going to break down the numbers for us on his big bear cabin that has the secret amenity chase. We can maybe offer you a couple rapid fire questions here to get into the numbers, but what was the purchase price on the property?
Chase:
The purchase price was 3 59. And
Ashley:
How did you finance the deal?
Chase:
I just financed through our company a second home loan. Actually, we didn’t even think we were going to rent it on Airbnb the first time, but yeah, it just happened to work out. Yeah, 10% down. But the funny thing was is in 2021, a lot of things were going over asking, and so we actually overpaid for this one just a bit like about $5,000 because it didn’t appraise for that amount of money.
Ashley:
And then the furnishings, did you pay for that out of pocket or did it come furnished?
Chase:
I think there was a few furnish furniture, but we mostly purchased everything new. We left the stove and things like that, and I think we sold the old refrigerator, so we kind of sold some things and then repurchased everything ourselves.
Ashley:
And what was the total cost of the furnishings and any rehab on the property?
Chase:
Furnishings and rehab was probably about 65,000, which sounds crazy to me. And I’m like, why would we do, we didn’t run numbers on this at all, just FYI feel terrible now I’m all about running numbers for all of our other properties, but this one was purely emotional and I feel bad for saying that, but it ended up working great.
Ashley:
Okay, so now that the property is all renovated, Tony, maybe you can ask better short-term rental questions as to what the gross income is, but I’ll start off with what’s your average daily nightly rate on this short-term rental?
Chase:
So it varies on seasonality for sure. So it could be as low as 2 25 and as high as $900 is the highest that we’ve ever gone.
Tony:
So what does revenue look like last year for you on this property chase?
Chase:
So we acquired the property 2021. So first full year 2022 was like 130,000. It dipped down a bit in 23 to 120,000. And that’s a combination of direct booking Airbnb and surprisingly not a lot of people know, but Gigster and Peerspace. So we do some photo shoots as well. Yeah, especially since we’re so close to la, we’ve had a lot of photo shoots where sometimes just the day rate for eight hours exceeds two or three nights, so sometimes it’s really good in that aspect.
Tony:
And what did you net on that one 20 for last
Chase:
Year? Expense ratio is roughly 55%. So after mortgages and all that stuff, because again, we were pretty lucky since we obtained the property April, 2021 and after we did the renovations, we went ahead and refinanced January of 2022 before February where they started adding in the loan level price adjustments for second homes and investment. So we got in pretty good. The interest rate on that is 3.375%. Yeah, because initially at the purchase we purchased that at 4.125, but because we added lender credit, so I knew that in six months after renovations we were going to refinance again. So we wanted to acquire the property with no closing costs.
Tony:
You guys are netting somewhere in the ballpark of like 50 grand a year, which is fantastic on a property of this size to have a one bedroom putting off 50 grand of profits is pretty crazy. Now one question that jumps out to me Chase, is as I look at your listing here, I see that you’ve been featured in Dwell, which is a big upscale real estate type publication, Conde Nast Traveler as well. So walk me through how you got your property featured in some of these publications.
Chase:
So the first one was actually Conde Nast Traveler, and it was just because we gave someone a really great experience. So we knew that the guest coming in was an influencer that was our first big influencer at the time. And all she asked was, Hey, I know you have a four night minimum, do you mind doing a three that minimum? And we said, no problem. We would love to host you. And it was for Christmas. And so I don’t want to say that we did everything right on that situation. I think it was just the perfect timing for everything, meaning she came during Christmas and we were worried about Covid because she may not come, but she ended up coming. We thought, Hey, let’s go above and beyond. It’s Christmas. So we put up a Christmas tree and put Christmas decoration, but we actually wrapped her a gift underneath the tree, so she would already have a gift from Santa.
And then yeah, during her stay it snowed. So it turned out really well. She loved the secret amenity. At the time, we actually didn’t have the Secret book shelf door, that was a later amenity, but what we used to do is we would leave music on for people to just come in and they would have to search where that music would come from and they would eventually find their way into the movie room. But we added the treasure hunt later to make it even more exciting I guess. But come to know, she was a new editor for Conde Nast and she wanted to tour all of California. And so she stayed at, I don’t know, I believe eight to 10 Airbnbs and she’s been traveling even before that. And she said that your place is my favorite and I’m going to write about it. And I’m like, she didn’t even tell us. She just published it.
Tony:
You just gave me an amazing idea. I’m going to have my team of virtual assistants log into my LinkedIn profile and just search for editors of Conde Nast of Dwell of all these other big publications and literally just offer them free, saves my properties, and then if we can get them to start writing about it, that’s a super, super, super efficient way to get some of this publication. So thank you Chase. I appreciate that. Man, that’s like a million dollar idea right there.
Chase:
That’s exactly what we did for Dwell and Sunset Mag. So after that it was just swear. So after that we leveraged the one and I said, Hey, and I just started emailing, sending letters, calling I sl into so many dms, but my wife was okay with it, so it was to different editors, and she was like, I can’t believe you got dwell. No way. I’m like, yeah. So I just kept, and it just so happened to, they said, we love it, we love this idea, we love to write about you. And it was great.
Ashley:
Pretty soon when we talk about building a team for short-term rentals, we’re going to be adding a PR person onto the list who goes out and solicits influencers and magazines to write articles. So Chase, I want to ask, what were you and your wife doing during this timeframe of your life? Were you guys working? What else was going on when you purchased this property?
Chase:
So at this time I was a full-time mortgage lender, and my wife was also a full-time optometrist. And once we got into it, I think around the time our first, our son was about one years old and we wanted to dive deep into it, and I told her, Hey, is this something you want to do? And she’s like, well, I love it, and then let’s just go all in. So she quit her optometry job so that we could go all in on real estate. I essentially had to keep my mortgage lending because it kind of went hand in hand, but so she just, full-time helps us host.
Ashley:
Oh, that’s awesome. And congratulations for both of you to be able to make that possible. I mean, that really is the dream of a lot of people. Why they get into real estate is being able to make that happen.
Chase:
Our main goal was just to be more present with our kids. And I asked her, Hey, you’re the doctor. You’re way smarter than me. You tell me what you want to do. She goes, no, I love being a doctor, but I can be that later. I can’t be a mom of these kids. And I was like, yeah. And we both work from home and we both get to have breakfast, lunch, and dinner with the kids, and that was our main goal. We wanted to be present and this was a way for us to do it.
Ashley:
So Chief, we’re going to take a short break, but when we come back, I want to touch on what your roles and responsibilities are for your partnership with your wife and what hers are. I want to get to understand are there any things that came from your previous experiences that helped you in the roles that you have today? So we’ll right back. Okay. Welcome back everyone. We are here with Chase, his wife recently quit her job to go full-time real estate. So Chase, let’s start with your wife. What are her roles and responsibilities in this job?
Chase:
So my wife, April is pretty much our operations manager for all the properties and also our design lead now. So we do hire designers on our team, but because we have so many projects going on all at once, we want to make sure that she’s not too spread out, too thin. So she handles most of the messages, inventory, some repair coordination, and then mostly just conceptualizing our new designs because we’re going more towards new construction. So picking material furniture and coordinating all of that.
Ashley:
And what experience has she had that has kind of brought her to be good at design? Was it optometry?
Chase:
So yeah, so she definitely has vision. So my wife and I have always been into hospitality. Her parents have owned multiple restaurants, donut shops, Louisiana Fried Chicken and Hospitality was always her number one thing. And as we dated, we actually started a little side business, a wedding videography, photography business and all that. Creativity from the hospitality and creativity kind of led her to this point. It started off with just maybe baking or designing some cakes and then doing a mood board or doing a backdrop for someone’s birthday, and then it just slowly kept moving towards building full houses and designing full houses.
Tony:
So Chase, we know that your wife was the one with the vision and the relationship here, but what about you, brother? What was your background like? And we know you’re in the lending space now, but what led you into real estate investing?
Chase:
My dad was an engineer. My brother is an engineer, and I was going to be an engineer, and I got my license or what they call EIT, but I guess a failure at the time led me down this path, a failure, meaning looking back at it now, it wasn’t really what you knew, it’s who you knew. And back in college I was always like, well, why are you going out networking and talking to these other people you should be studying in the library? And I thought it was all about just knowledge only, but it doesn’t help anyone if nobody knows that you know that. And so I couldn’t get a job lending. So then I worked part-time as a barista and then as an assistant in mortgage lending. And then I pretty much took whatever job I could find to make it work for our family.
And then we started that videography business. So the reason why I bring up all those things is all those things made up to what we are today, meaning the photography in Conde Nast, those are all of our photos that made it on there. And in our cabin, our lending helped us get that. And my wife’s design helped us design that, and our just pure hustle was able to get us to get all these publications to notice us, and we’re finally coming full circle to where we are the investor or the developer that is working essentially with the engineer or the builder to create from ground up. Yeah, geez, that’s awesome. Congratulations. Thank you.
Tony:
Yeah, it’s crazy how when you look back, you can see how all the dots connect. And Steve Jobs talked about that in one of his speeches that he gave, but it’s like you can never identify looking forward how everything’s going to connect. But looking back, you always can So Chase, obviously you’re in the lending space, but I guess how did you know that that would continue to work for you?
Chase:
Actually, I learned from my clients. So I had a client and he just kept buying every year. I was like, how are you doing this? No offense, I see what your job is. I mean, you work for Trader Joe’s and you’re an assistant manager, but how are you doing this? And he just showed me how, well, because I have to see his tax returns and all that, and I see it on the schedule. I was like, how did you get this all done? And so from that client, I started diving deeper into it and I said, Hey, if you have a plan in place, you can actually make things happen. And understanding the lending and how it works and all the nuances allows you to scale efficiently and to be able to scale, even if you don’t have a lot of money, you’re just using it in a more impactful way.
Tony:
So you mentioned the word scale, and I think that’s what I would love to get into because I think you mentioned Chase, that you guys have five total short-term rentals. Is that correct? Yes. Yeah. And you’ve done that since 2021, which is a relatively brief period of time to move that quickly. So I guess I’m curious, you get this first property in Big Bear, absolutely crush it. When does that second property hit, and I guess how do you go about funding that second deal?
Chase:
Yeah, so that one was, we actually at the time, they still allowed HELOCs on second homes. So we took a HELOC out after the renovations. So we essentially got our money back, and then we actually went to Joshua Tree because we saw that a lot of people were there, and that was kind of our catalyst in learning how to remotely manage. But we got it October of 2021, and for some reason I had this feeling that, man, I feel like this is getting saturated. And maybe, but I mean saturation is a taboo word, but it just felt like there was a lot of competition coming to Joshua Tree with there’s people putting pools and really cool game rooms and garages, things like that with a Mario theme. There’s just these amazing couples that are doing these amazing things. And I was like, oh, shoot, I better go do I know there are beautiful couples out there that are smart that are doing all these things.
And so I was like, oh, shoot, I better go to somewhere else. And then we thought about Smoky Mountains, and another reason why we did that was because in the city that we were in, it’s called 29 Palms, the regulations were coming down. And I was like, well, I don’t want to operate somewhere where the city’s against you in the Smoky Mountains. They depend on that, and I love that. If the county and the city is kind of supportive of it, let’s go there. So we did a 10 31 exchange and we moved it to the Smoky Mountains. And then Chase,
Ashley:
Real quick, can you explain what a 10 31 exchange is please?
Chase:
Yeah. So 10 31 Exchange is just a tax deferral strategy. It doesn’t mean that we’re never going to pay taxes, just not on that transaction. So as long as it’s when you sell a property, an investment property and purchase another investment property or more expensive, then you could defer the taxes and I think it could mostly go into equity and it could pay for some closing costs. So we did have to come up with some closing costs, but most, our entire down payment was pretty much covered to purchase that property. The next one was kind of a unique one. Again, just taking advantage of what was happening in the market. I don’t know. For some reason at the time I was just like, man, I really wanted Tesla. Those Teslas look cool. But yeah, so while we were in the Smoky Mountains, we got connected with a realtor, her name’s Madeline, and then she was discussing something about Kentucky.
So I thought, okay, let’s take a look there. And then fast forward a few months later, one of my friends connected us to another realtor locally in Louisville, Kentucky, and I was like, why are we going there? And then she started explaining everything, and I was like, what’s in Louisville, Kentucky besides fried chicken? She was like, what? There is the oldest running sport. It’s called the Kentucky Derby. I’m like, oh, shoot. Yeah, that’s true, but that’s only one event. So we wanted to go to Louisville, and then we wanted to purchase something not too expensive because our budget was pretty limited at the time. And she said there was a derby, there was also new concerts coming in called Bourbon and Beyond. And at the time when we were going, I was like, what is Bourbon and beyond and why would someone go there? Well, Bruno Mars was the headliner, so a lot of people are going to go there.
I’m like, oh, okay. And then there’s another concert, I think a rock concert as well. But she goes essentially, besides all that, this is where bourbon is made and bourbon has no season. People drink bourbon all year long. And I was like, well, I don’t even drink. And that convinced me. So we went and looked for a property, and the reason why this one is actually our most favorite deal was because we found a property that was a single family, but it was on an oversized lot. And why we were so excited about that was my agent kept telling me, my agent, Miley Corona, kept telling me, Hey, I think you could split that and you could sell it off and you would be in this deal, no money. I was like, oh, or better yet, you could split that lot and build on it. I was like, no way. I can’t even fathom that. Is that possible? She goes, let’s do our due diligence. So we did. We looked for a surveyor, he double checked it, checked with the city, and he was all good. We made an offer and we closed on it. I
Ashley:
Have to highlight one thing that you said was you checked with the city and they okayed it. How important that piece is during your due diligence period to actually, or even before making the offer, is to check to see if you’re actually going to get approval, whether it from the code enforcement officer, the planning board, et cetera.
Chase:
Yeah, yeah, that was the scary part. I was like, oh, but the nice thing was no matter what, it was still a good property, but we really wanted that extra value. So we wanted to check and learning about the zoning laws and their density calculations was really critical in making sure that this deal was amazing. And once we closed on the deal, the one thing that we didn’t know was that subdividing and all that was actually very easy. The most difficult part that people don’t understand is about what’s called partial release. So what that is is whenever you purchase a property, whether it’s oversized lot or not, the lien is on the total property. So even if you subdivide it, there’s still a lien on the old lot and old house or existing plus the new subdivided lot, the lien is over all of them.
It’s a whole blanket, and some lenders do not allow partial releases until after a year. So in this case, our lender would not allow it to be done until a year, so we had to wait a year, then we had to apply, they had to do an appraisal to ensure that the subdivided lot, what is the remainder, can still comp with the area. Luckily for us, we did all that research, we put a presentation together for the lender. They loved it, and they said, you’re right, the comp show that it’s there, it’s actually increased in value. And so to release it, it was only about $10,000. So we got a lot for 10,000, which is great.
Tony:
Chase, one quick follow up on that. You said that you gave a presentation to the lender. Was this a local regional lender or who was this that you were able to give a presentation to?
Chase:
It was a servicer, and what I meant by a presentation was more than just writing an email. So I actually put a report together where I put my purpose and my goals. I researched comps with my realtor, I put comparisons on a grid of gross living area versus the main topic was the square footage of the lot. And that by removing that excess lot, it doesn’t degrade the property. It’s actually still pretty well. And so that’s what I wanted to show.
Tony:
So biggest question is the numbers on this thing, you go through all of that. How does it actually perform once you finish off this process? Yeah,
Chase:
That one. So at this point now we’re actually running numbers and we want to make sure that it does well. So this was a 300,000 purchase, and our goal is always 20% gross. ROI, meaning 20% of the purchase price. So this did 70 K, so it did pretty well. And we put in about 25, no, no, sorry, 25,000 furniture and about 10,000 in renovations because we renovated the bathroom and did paint and light fixtures and things like that. And so the return on it is really great, and we only sleep six in that one. But the great thing is that now we’re able to partially release the other side, and they actually just put up framing and roofing this week. So we’re actually building a duplex on the other side because due to the density calculations, we thought we were only going to build a house, a single family, but because the surveyor and I checked it ahead of time, when we did the density calcs, they say, oh, this is an R six property, which means once you split it, you can theoretically put a duplex on there. So we’re doing a two bed, two bath duplex each unit, and that was just a praise of an RV of 4 75, and we got a construction loan for the build, which was like three 30. And so that’s instant equity with nothing out of pocket.
Ashley:
Yeah. Chia, one question I have on this, are you going to that duplex? Is that going to be long-term rental or is that going to be more short-term rentals,
Chase:
We have two options. So we can’t do another short-term rental in the area because Louisville has very strict guidelines to short-term rentals. So you could only have one short-term rental per 600 feet. So for that one, it would have to be a mid-term rental, which is great in that area because there’s actually five hospitals around the area. There’s not as much demand for nurses anymore, but that is still an option. But our goal is to actually do long-term rental because renting is pretty limited there. And when we try to put our main single family house, which is the left side on long-term rental, we were able to garner activity at like 2,400, and that’s a three bedroom. So maybe getting this at 21 or 2200 each unit would be a pretty big win. And
Ashley:
Then what is going to be your cashflow average? I know you can’t say specifically, but what will be your average cashflow for these three units when everything is set and done and they’re all occupied and rented out?
Chase:
So I think for the duplex, it’s somewhere between a thousand to 2000, so let’s say 1500. So it is a 18,000 net on that because it’ll be a long-term. And then the other one is about a 50 or so percent expense ratio as well. So let’s say around 30. So 48,000 cashflow between these two. So that’s net after expenses. So I would say it’s not that bad for such a small investment. So
Tony:
Just last thing I want to call out about this. So you found this market almost by happenstance, just through having conversations. And for me, I think it can be overwhelming as a rookie investor to look at a map of the United States and seeing 19,000 different cities and try and choose the one that aligns best with your goals. And I love the process of talking to other people who know these markets really well, whether it be agents or investors, and getting a firsthand account of their experience in those markets. I went to the Smokey Mountains initially because I had a friend who bought there. I went to Joshua Reve for similar reasons we bought. So you start to identify, Hey, someone’s already laid the roadmap for me here. Let me use that as a proof of concept to say, this works well for me because you’re in California where I’m at. Have you ever heard of Shelby, bill, Kentucky before you bought out there? Probably not. But as you’ve identified, there’s a market there that supports this type of business. So I just wanted to make sure we highlight that for Ricky listeners because it’s a sticking point for a lot of people is choosing the right city. But I think Chase, you exemplified a great way to kind of navigate around that. Yeah,
Chase:
Thank you. Yeah, a lot of people do wonder why we spread out into so many markets, but I really enjoy it, one for our family because whenever we go on vacation, we get to go to all these different cool places. But I think once you get a process, the city is just another variable in your process and your operations, research the market, find your team, deploy that team, and I think varying your investments kind of balances out your portfolio. If you think about it, big Bear is a winter market, and so we do really well during that winter timeframe, which is great to balance the Smoky Mountains because after New Year’s it’s pretty slow till spring break, so it kind of holds over on that. So we’re not really negative during that timeframe. And then during the summer where Big Bear is slightly slower, we’re picking it up in the s Smokey. So it’s a really nice complimentary portfolio. I guess
Ashley:
Chase, as we wrap up here, we always put each guest information into the show notes and our rookies love to reach out to the guests and ask questions. So let me ask you this. What are your superpowers that rookies could reach out to you and learn from you? What are some of the things that you think that you stand out on and you would love to educate other people about?
Chase:
Yeah, I think it, it’s two things now. It’s the photography and the marketing aspect of it. How to best show your property on Airbnb and how to take photos and how to maximize whatever amenities you have. And also building, I mean, I don’t know if it’s a superpower yet, but man, I’m working hard to make it a superpower. Shoot. I mean every developer had to start sometime. So.
Tony:
And Chase, I think that actually leads into my next question, right? Because you’ve talked about the new builds a little bit, but I guess how do you vet the actual construction crew that’s doing the building, especially if you’re going into these new markets you’ve never been into before. What is your process for building the team to support the new development?
Chase:
Just like what I said before, the network is what really determines it. A lot of references help out a lot. And also surprisingly, sometimes I can’t do every loan. And so what I actually say is for construction or commercial, local is pretty good. So we work with a local credit union or a local bank because that’s more a relation type of thing. And the reason why I say that is they have the construction products that you may want, and they’re already approved with many builders around the area. So why that’s key is if they’re already approved, that means they’ve already vetted all these builders. They’ve already done projects with them. And I don’t know if you know the construction process, but there are three steps to it with the lender is it’s builder approval, project approval, and then borrower approval. So the builder approval is usually the hardest part. Actually, they run their credit, they want to make sure they have the experience, they have the liability insurance and the liquidity to be able to build these projects. And then it goes on to the project approval, your specific project with your plans and all that. And then the borrowers.
Ashley:
And if your builder is already approved, what a great reference to ask that lender. Have there been any issues with this builder, with any of your clients? Because they’re most likely going to know I built a house and we had a phenomenal builder. There was no issues, but if there wasn’t issue, I would’ve went to my lender and say, hold the draw. I don’t want him to be paid yet. These things need to be done. The lender is most likely going to know there was a holdup in the timeline if something wasn’t done correctly, and their inspector came out and said, no, don’t give out the draw. This needs to be fixed, or this isn’t done yet. So that’s also a great reference point too, is asking your lender if they know of any bad experiences or great experiences on this builder that’s already been approved by them.
Chase:
And then what people don’t realize is that they have their own team. And if you get embedded in that team, everything goes so smooth. In Kentucky, when we’re building the duplex, the builder is friends with the lender and the lender knows the surveyor. And so all three just made all the permits go smoother with the city, and they already know the process of the draws. And yeah, everything’s going faster than scheduled because everything’s just smoother with them already. They’re all familiar with one another.
Ashley:
Well, if you guys listening, want to learn from Chase before he becomes a nationwide builder and you can’t even get in contact with him, we’re going to put his information into the show notes so you can reach out to him if you have questions or want to learn more about him and his process. So Chase, thank you so much for joining us on this episode of Real Estate Rookie. I’m Ashley. He’s Tony, and we’ll see you guys next time.
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